Debt collection practices
What can I do to pursue a debt?
Debt collection is a legitimate and necessary business activity where creditors and collectors are able to take reasonable steps to secure payment from consumers or businesses who are legally bound to pay or to repay money they owe. It is important that any organisation involved in recovering debt is aware of their legal obligations.
You should treat debtors and third parties fairly and with respect and courtesy. You should never harass or coerce them, treat them unconscionably or mislead them as to the nature of their debt, their legal obligations or any possible outcomes if the debt is not paid.
You should also not pursue a person for a debt unless you have reasonable grounds for believing the person is liable for the debt.
Contacting a debtor
Communications with the debtor must always be for a reasonable purpose, and should only occur to the extent necessary. It may be necessary and reasonable for you to contact a debtor to:
- give information about the debtor’s account
- convey a demand for payment
- accurately explain the consequences of non-payment, including any legal remedies available to the collector/creditor, and any service restrictions that may apply in the case of utilities (for example, electricity)
- make arrangements for repayment of a debt
- put a settlement proposal or alternative payment arrangement to the debtor
- review existing arrangements after an agreed period
- ascertain why earlier attempts to contact the debtor have not been responded to within a reasonable period, if this is the case
- ascertain why an agreed repayment arrangement has not been complied with, if this is the case
- investigate whether the debtor has changed their residential location without informing you, when there are grounds for believing this has occurred
- sight, inspect or recover a security interest
or for other similar purposes.
You may also contact a debtor at the debtor’s request.
However, it is not reasonable or acceptable to contact a debtor to:
- frighten or intimidate the debtor
- demoralise, or exhaust the debtor
- embarrass the debtor in front of other people
or for other similar purposes.
ACCC-ASIC debt collection guideline: for collectors and creditors
The ACCC and the Australian Securities and Investments Commission (ASIC) have jointly developed a guide for those involved in debt collection. This guideline reflects the ACCC’s and ASIC’s view of how relevant provisions of the Competition and Consumer Act and the ASIC Act apply to debt collection conduct.
The guideline contains information on the role of ASIC and the ACCC in the area of debt collection, an overview of other relevant statutory and common law obligations and remedies not administered by the ACCC or ASIC, and practical guidance for collectors and creditors in the areas listed below.
- Contact for a reasonable purpose only (this section appears above)
- Making contact with the debtor
- Hours of contact
- Frequency of contact (including contact face-to-face with debtors, contact with third parties, and an explanation of undue harassment)
- Location of contact
- Face-to-face contact (including at the debtor’s home or workplace)
- Privacy obligations to the debtor and third parties (including the collection, disclosure and handling of the debtor’s personal information, the privacy rights of third parties and obligations regarding consumer credit reports)
- When a debtor is represented
- Record keeping (including recording debt settlements)
- Providing information and documents
- Consistent and appropriate correspondence
- If liability is disputed (including situations where liability is formally disputed)
- Repayment negotiations
- Contact when a payment arrangement is in place
- Contact following bankruptcy or a Bankruptcy Act agreement
- Conduct towards the debtor (generally)
- Debtors at a special disadvantage (including non-English speaking debtors)
- Conduct towards family members and other third parties (including communication with the debtor’s child)
- Representations about the consequences of non-payment (including credit reporting)
- Representations about the legal status of a debt (including statute-barred debt)
- Legal action and procedures
- Resolving debtor complaints and disputes
- The role of independent external dispute resolution schemes
Relevant consumer protection laws
The Australian Consumer Law, which is contained in a schedule to both the Competition and Consumer Act 2010 (enforced by the ACCC and state and territory consumer protection agencies), and the Australian Securities and Investments Commission Act 2001 (enforced by ASIC), contain three general prohibitions that may be relevant to debt collection activity.
1. Prohibition of the use of physical force, undue harassment and coercion
The use of:
- physical force
- undue harassment and/or
- coercion
to support a demand for payment for goods or services/financial services is deemed unacceptable and is prohibited. These provisions are not limited to conduct directed at a debtor. They also apply to the collector’s conduct towards a third party (for instance, a family member).
2. Prohibition of misleading and deceptive conduct
Collectors are prohibited from making any statement or engaging in any other conduct (for example, impersonating someone, or using a false letterhead or document) that is misleading or deceptive or is likely to mislead or deceive.
Collectors may breach this prohibition even though they do not intend to mislead—it is enough that the misrepresentation is likely to have this effect on the type or class of person to whom the conduct is directed. In some circumstances, a collector may need to positively disclose information to avoid creating a misleading impression.
Prohibition of unconscionable conduct
Collectors risk breaching this prohibition particularly when they exert undue influence or pressure on, or unfair tactics against, a debtor who is specially disadvantaged or vulnerable.
Further information
The ACCC and ASIC have also jointly produced a consumer brochure, Dealing with debt: your rights and responsibilities. This brochure assists people who are currently dealing with debt problems, or being contacted by debt collectors. It outlines consumers’ rights under the Commonwealth consumer protection laws, as well as general advice for those who are having difficulties with their level of debt. The brochure also assists friends, relatives and advisers of these consumers. A number of agencies and resources are listed in the brochure that people can contact to obtain further information, to seek assistance or to lodge a complaint relating to debt collection practices.